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SIMONDS FARSONS CISK PLC

FINANCIAL ANALYSIS SUMMARY

16 July 2018

Prepared by Rizzo, Farrugia & Co (Stockbrokers) Ltd, in compliance

with the Listing Policies issued by the Malta Financial

Services Authority dated 5 March 2013.

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The Board of Directors Simonds Farsons Cisk plc The Brewery, Mdina Road, Mriehel, Birkirkara BKR 3000, Malta 16 July 2018 Dear Sirs, Simonds Farsons Cisk plc – Financial Analysis Summary (the “Analysis”) In accordance with your instructions and in line with the requirements of the Listing Authority Policies, we have compiled the Financial Analysis Summary set out on the following pages and which is being forwarded to you together with this letter. The purpose of the Analysis is that of summarising key financial data appertaining to Simonds Farsons Cisk p.l.c. (C 113) (the “Company” or “Issuer”). The data is derived from various sources or is based on our own computations and analysis of the following: (a) Historical financial data for the three years ended 31 January 2018 has been extracted from the Issuer’s

audited statutory financial statements for the three years in question, as and when appropriate. Furthermore, the Pro Forma financial information of the Company as at 1 February 2017 was prepared for illustrative purposes only, in order to provide information on the financial position the Company following the spin-off of Trident Estates plc.

(b) The forecast data for the financial year ending 31 January 2019 has been provided by management of the Issuer.

(c) Our commentary on the results of the Issuer and on the respective financial position is based on the explanations provided by the Issuer.

(d) The ratios quoted in the Financial Analysis Summary have been computed by us applying the definitions as set out and defined within the Analysis.

(e) Relevant financial data in respect of competitors as analysed in part 7 has been extracted from public sources such as the web sites of the companies concerned, or financial statements filed with the Registry of Companies.

The Analysis is provided to assist potential investors by summarising the more important financial data of the

Issuer. The Analysis does not contain all data that is relevant to potential investors and is intended to complement, and not replace, information published or issued by the Company. The Analysis does not constitute an

endorsement by our firm of the securities of the Issuer and should not be interpreted as a recommendation to invest. We shall not accept any liability for any loss or damage arising out of the use of the Analysis and no

representation or warranty is provided in respect of the reliability of the information contained in the Analysis. As with all investments, potential investors are encouraged to seek professional advice before investing.

Yours sincerely, Vincent E Rizzo Director

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TABLE OF CONTENTS

IMPORTANT INFORMATION 4

PART 1 BUSINESS OVERVIEW 5

PART 2 MARKET TRENDS 10

PART 3 COMPANY FINANCIAL REVIEW 14

PART 4 RATIO ANALYSIS 24

PART 5 VARIANTIONS IN THE ISSUER’S FINANCIAL PERFORMANCE 27

PART 6 LISTED SECURITIES OF THE GROUP 28

PART 7 COMPARABLES 29

DEFINITIONS 31

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IMPORTANT INFORMATION

PURPOSE OF THE DOCUMENT

The purpose of this document is to present a financial analysis summary of Simonds Farsons Cisk plc (hereinafter,

the “Issuer” of the “Company”) in line with the requirements of the Listing Policies of the MFSA dated 5th March

2013.

SOURCES OF INFORMATION

The information that is presented has been collated from a number of sources, including the company’s website

(www.farsons.com) and financial and management reports of the Issuer, including annual reports and financial

statements.

Historical and pro-forma financial information is being presented in thousands of Euro, unless otherwise stated,

and has been rounded to the nearest thousand. The rounding could potentially alter the figures quoted to those

presented in full in the annual reports and financial statements of the Issuer.

FORECASTS

Forecasts that are included in this document have been prepared by the directors of the Issuer, who undertake

full responsibility for the assumptions on which they are based.

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PART 1 – BUSINESS OVERVIEW

1.1 BRIEF INTRODUCTION

From its origins in 1928, Simonds Farsons Cisk plc (the “Company”, “Group” or “Issuer”) is the result of the

amalgamation of L. Farrugia & Sons Limited, H & G Simonds and The Malta Export Brewery. The construction of

the brewery in Mriehel was completed in 1950 under the direction of managing director Mr Lewis V. Farrugia.

Further enhancements and additions to the brewery were undertaken over the years, extending the facilities to

bottling plants for soft drinks as the Group embarked on an expansionary strategy across various segments of the

food and beverage industry. Additional properties were acquired over the years in line with the expansionary

requirements of the Company and the operations of its subsidiaries. Earlier this year, a spin-off of most of such

property interests into a newly-listed company was undertaken (as explained in further detail in section 1.6 of

this report).

Today, the Group is made up of three distinct segments:

i. Brewing, production & sale of branded beers & beverages

ii. Importation, wholesale & retail of food & beverages, including wines & spirits

iii. Operation of franchised food retailing establishments

Further information on these segments is included in section 1.5 of this report.

1.2 DIRECTORS AND SENIOR MANAGEMENT

The strategic direction of the Company is entrusted to a board of eight directors, the majority of whom act in a

non-executive capacity:

Board of Directors Role

Mr Louis A. Farrugia Executive Chairman

Mr Marcantonio Stagno d’Alcontres Non-Executive Vice Chairman

Mr Michael Farrugia Executive Director

Mr Roderick Chalmers Non-Executive Director

Dr Max Ganado Non-Executive Director

Ms Marina Hogg Non-Executive Director

Marquis Marcus John Scicluna Marshall Non-Executive Director

Baroness Christiane Ramsay Pergola Non-Executive Director

The Group’s company secretary is Ms Antoinette Caruana.

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Simonds Farsons Cisk plc(the "Company" or "Issuer")

Food Chain Limited("Food Chain")

100%

Farsons Beverage Imports Company

Limited("FBIC")

100%

Quintano Foods Limited

("Quintano")100%

Gallerla Management

Limited100%

Portanler Warehouses

Limited100%

Farsons Distribution

Services Limited100%

EcoPure Limited("EcoPure")

100%

The Company’s board is assisted by a complement of senior executive management in the execution of the

board’s strategic direction, made up of the following:

Senior Management Position

Mr Norman Aquilina Group Chief Executive Officer

Mr John Bonello Ghio Group Head of Food Business

Mr Chris Borg Cardona Head of Logistics

Ms Antoinette Caruana Group Human Resources Manager

Ms Stefania Calleja Head of Sales & Customer Relations

Mr Eugenio Caruana Chief Operations Officer

Mr Michael Farrugia Chief Business Development Officer

Mr Philip Farrugia Group Head of IT & Business Services

Mr Ray Sciberras Chief Operations Officer (retired 5th June 2018)

Mr Pierre Stafrace General Manager – FBIC Limited

Ms Anne Marie Tabone Chief Financial Officer

Ms Susan Weenink Camilleri Head of Marketing & Communications

In addition to senior management, the Group includes a staff complement of 823 (full time equivalent) employees

as at the end of the last financial reporting period (31 January 2018) across the various subsidiaries, including the

operation of the franchised food retailing establishments.

1.3 THE GROUP

The Company is the parent of a group of companies – the Group. Hereunder is the organisation chart showing

the various subsidiaries within the Group:

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1.4 MAJOR ASSETS OWNED BY THE ISSUER

Property, plant and equipment (PPE) represents the major component of the Group’s assets. This component

represents the assets required for the operation of the Group’s business, and comprise:

Net Book Value

Land and Buildings €78.3 million

Assets in Course of Construction €8.2 million

Plant, Machinery & equipment €30.9 million

Total €117.5 million

Assets in course of construction mainly relate to works carried out during financial years 2017 and 2018 on the

extension of the Logistics Centre, truck depot and the kegging line project. As at 31 January 2018, PPE made up

over 70% of the Group’s total asset base.

Trade and other receivables were the next most significant categories of assets of the Group, at €22.8 million,

representing 14% of total assets. Inventories, which by the end of FY2018 were €13.7 million, include €3.2 million

of raw materials and consumables used for the production and bottling of beverages and food items relating to

Food Chain Limited’s food products; €7.8 million in finished goods and goods for resale; and €2.6 million relating

to containers, other packaging / bottling materials and spare parts.

1.5 GROUP’S SEGMENTS

Until recently, the Group reported four main segments of operations. When the board started exploring the

idea of the spin-off and took a firm decision thereon, the segment related to the spin-off was classified as being

held for sale and its performance reported as discontinued operations (refer to section 1.6 related to the spin-

off). Today, the Group’s main operational segments are as outline in Section 1.1 above. Further information

relating to these business segments is provided below.

BREWING, PRODUCTION AND SALE OF BRANDED BEERS & BEVERAGES

The ‘brewing, production and sale of branded beers and beverages’ segment includes Eco Pure and the Company,

i.e. Simonds Farsons Cisk plc. This segment represents the core business of the Group and is thus the segment

that, from a financial performance point of view, is the most material and the largest contributor to the Group’s

profitability. The Company produces and distributes its own brands – Kinnie™, Cisk™, Blue Label Ale™, Hopleaf

Pale Ale™, Classic Brews™, Shandy™, Lacto™ and San Michel™. The Company is also the exclusive franchisee in

Malta to PepsiCo, Budweiser and Carlsberg, having the rights to produce, bottle, sell and distribute the said

products, amongst other related products, including Skol™, LikeCola™ and 7Up™. Meanwhile, Eco Pure Ltd is the

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company responsible for the marketing, sales and distribution of 18.9 and 10 litre bottles of San Michel water,

providing also water dispensers and coolers for rental or purchase.

IMPORTATION, WHOLESALE AND RETAIL OF FOOD & BEVERAGES, INCLUDING WINES & SPIRITS

The ‘importation, wholesale and retail of food and beverages, including wines & spirits’ consists of FBIC and

Quintano. While the former focuses mostly on wines and spirits and other beverage brands, the latter imports

and distributes food-related items. In the beverage sector, FBIC nurtures and continues to increase its

representation of renowned international producers and brands which include Pernod Ricard, Gruppo Campari,

Red Bull, Jagermeister, Remy Cointreau, Guinness and Perrier. In the food importation, Quintano also represents

international brands which include, Danone, Tropicana, Walkers, Doritos, Quaker, Trevalli and STAR. FBIC also

operates Farsonsdirect, through which it retails a selection of these brands.

OPERATION OF FRANCHISED FOOD RETAILING ESTABLISHMENTS

In Malta, the internationally-renowned franchises KFC™, Burger King™ and Pizza Hut™ are exclusively operated

by Food Chain. This segment ‘Operation of franchised food retailing establishments’ operates a total of fourteen

outlets under these franchises.

1.6 MATERIAL OPERATIONAL DEVELOPMENTS

The Group has consistently invested in innovation across its product range and has recently also invested in

operational structures to ensure that the Group increases its production capacity and efficiency, has room for

further growth and is in a position to obtain the benefits of economies of scale.

Following a multi-million Euro investment programme, the Group now has a state-of-the-art brewing and

beverage production facility, comprising the following:

- A brewhouse with malt silos, unmalted cereal silos, equipment for malt milling and main brewing and

wort cooling vessels.

- A beer process block equipped with a tank farm with a capacity that provides flexible brewing capability

to the highest standards.

- A soft drinks packaging hall which maximises high standard production efficiency and is capable of

handling a variety of PET packages.

- A beer packaging hall, including a centralised warehouse storage facility for raw and packaging materials.

- A logistics centre that complements line output, ensures optimal storage and provides a seamless service

to trade and to the Company’s export customers.

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During the course of the last financial year, the above facilities were complemented with an extension of the

dedicated logistics centre, featuring a 40% increase in warehousing capacity and the introduction of a shuttle

pallet transfer system resulting in more efficient space utilisation. Furthermore, investment for the modernisation

of the packaging capabilities was made in a new Keg Plant which features new filling machines for kegs and 18.9

litre bottles equipped with two robotic arms.

Other significant investments are currently underway and include:

- more energy efficient equipment within the engine room, with groundwork plans for new boilers, chiller

and refrigeration pipework and equipment;

- the replacement of over one third of the current delivery truck fleet with the latest eco-friendly models;

- digitilisation of plant and machinery;

- green initiatives to reduce waste and improve refrigeration power consumption; and

- the renovation of the original brewhouse.

THE SPIN-OFF

During 2017, the Group also concluded the process which led to the spin-off a substantial part of its property

portfolio through the listing of the Company’s shareholding in Trident Estates plc (previously known as Trident

Developments Limited, hereinafter, “Trident”) on the Malta Stock Exchange. The spin-off of Trident was approved

at last year’s general meeting and in line with this approval, on 20 December 2017 the board of directors declared

a dividend of €37.2 million that was settled through the distribution of the Company’s entire shareholding in

Trident Estates plc to all shareholders pro rata to the number of shares held by them in the Company as at close

of business on 21 December 2017. The resulting net asset value as detailed in the prospectus issued in connection

with the spin-off amounted to an equivalent of approximately €1.24 per share.

On 30 January 2018, Trident Estates plc was listed on the Malta Stock Exchange and trading commenced on the

following day. The board of Trident is composed of eight directors, two of whom represent the general public

shareholders, in a similar way that the Company’s board is composed. Although to a very large extent Simonds

Farsons Cisk plc and Trident Estates plc have common shareholders, they are now separate and distinct groups

that are run independently.

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PART 2 – MARKET TRENDS

The European food and beverage industry is the largest manufacturing sector, generating a turnover of €1.1

trillion (in 2016) and contributes c. 1.7% to Europe’s gross value added. It is estimated that the average household

spends approximately 14% of its income on food and beverage in Europe.1

Year 2012 2013 2014 2015 2016

Food Industry (C10) 837,000 860,000 870,000 880,000 866,000

Beverage Industry (C11) 140,855 142,801 144,390 151,164 154,120

Production Values (millions of € ) 977,855 1,002,801 1,014,390 1,031,164 1,020,120

Production growth rate 3.4% 2.6% 1.2% 1.7% -1.1%

Food Industry (C10) 914,000 940,000 945,000 957,000 950,000

Beverage Industry (C11) 148,000 149,610 150,330 157,750 158,976

Total Turnover Value (millions of € ) 1,062,000 1,089,610 1,095,330 1,114,750 1,108,976

Turnover growth rate 3.8% 2.6% 0.5% 1.8% -0.5%

Source: Eurostat

Food and beverage production across European Member States declined by 1.1% in 2016, when compared to the

previous year. Consequently, turnover growth during the same period fell by 0.5%2.

THE EUROPEAN MARKET FOR BEVERAGES

The European beverage market grew by a stable rate averaging 1.8% over the period 2012 to 2016. This

development can principally be attributed to the global perception of the high quality of European products and

increasing incomes driving higher consumer demand for beverage products in emerging countries. The conclusion

of a series of free trade agreements with non-EU countries in the last years has also contributed to increased

market opportunities.

With other regions acknowledging the value of the high quality of EU products and adopting similar legal

frameworks, this competitive edge may weaken in the coming period if no further action is taken. Possible

initiatives to maintain or strengthen the competitive edge of the European industry can be categorised into;

strengthening the international trade position, supporting productivity, and improving the functioning of the

supply chain3.

1 FoodDrinkEurope - http://www.fooddrinkeurope.eu/uploads/publications_documents/DataandTrends_Report_2017.pdf 2 Eurostat - http://appsso.eurostat.ec.europa.eu/nui/submitViewTableAction.do

3 European Commission – The competitive positions of the European food and drink industry

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THE EUROPEAN BEER MARKET

Latest figures reported by the Brewers of Europe show that production and consumption of beer in Europe have

continued to grow, and annual beer production has now moved above 40 billion litres (2015: 36 billion litres) for

the first time since the financial crisis. Active breweries in the EU now amounts to 8,500 and it is estimated that

twenty new breweries are set up each week. The growing consumer interest in craft beer is one of the main

drivers behind the noteworthy expansion of brewers4. The graph below shows beer consumption per capita in

Europe by country. Malta ranked 23rd in terms of beer consumption per capita (53 litres).

Other key factors contributing to the growth in the beer market are mainly attributable to; the availability of

low/non-alcoholic beer; a wider variety of beers with rich flavour and aromas as well as low calorie beers; increase

in disposable income; and the effect of creative marketing by brewers.

Source: www.brewersofeurope.org. No update is available as at the date of this report on 2017 figures

4 The Brewers of Europe - https://www.brewersofeurope.org/uploads/mycms-files/.../Statistics-201712-001.pdf

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31

33

36

46

47

48

51

53

55

55

62

62

67

68

69

73

74

75

76

77

78

79

80

80

81

88

98

103

104

143

0 20 40 60 80 100 120 140 160

Turkey

Italy

France

Greece

Spain

Portugal

Sweden

Norway

Malta

Cyprus

Switzerland

Denmark

Hungary

United Kingdom

Belgium

Netherlands

Slovakia

Luxemburg

Croatia

Bulgaria

Finlands

Latvia

Slovenia

Estonia

Romania

Ireland

Lithuania

Poland

Austria

Germany

Czech Republic

in 1,000hl

Beer Consumption in litres per Capita

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THE EUROPEAN SOFT DRINKS, PACKAGED WATER AND NECTAR MARKET

The soft drinks and nectar markets have seen a marginal decline in consumption over the past couple of years. In

response to consumer demands, companies are re-focusing on their product development to re-formulate

products which contain lesser sugar content. Accordingly, European consumers as a part of their broader healthier

lifestyles, continue to purchase bottled water, resulting in a steady growth rate since 2010.

Source: Unesda

THE FOOD AND BEVERAGE MARKET IN MALTA

Overall, the growth experienced in the food and beverage market in Malta has been driven by the growth in

Maltese GDP as the population became more affluent. The substantial growth in inbound tourism has also played

a very important part. The increasing population of foreign nationals and the changing lifestyles with people

resorting to fast food services have also contributed to the patterns seen.

BEER CONSUMPTION

After a slight decline in 2011, beer consumption in Malta has increased over the past 5 years at an average growth

rate of 4.1% in line with trends experienced in other European countries. This growth is mostly attributed to the

country’s continued positive economic performance, the sustained growth of the tourism industry, the

continuous product innovation and effective marketing initiatives undertaken by the Group together with mass

market events hosted during the year.

0.0

10000.0

20000.0

30000.0

40000.0

50000.0

60000.0

70000.0

2011 2012 2013 2014 2015 2016

EU Consumption of Soft Drinks, Pacakged Water and Juices (2011 - 2016) (million litres)

Soft Drinks Packaged Water Juice & Nectars

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Source: www.brewersofeurope.org. No update is available as at the date of this report on 2017 figures

2010 2011 2012 2013 2014 2015 2016

Europe - total consumption 372,201 374,395 372,939 366,855 369,253 372,787 375,214

Malta - total consumption 196 189 199 202 211 218 231

362,000

364,000

366,000

368,000

370,000

372,000

374,000

376,000

0

50

100

150

200

250

Total beer consumption in thousand hecta litres (hl)2010 to 2016

Europe - total consumption Malta - total consumption

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PART 3 – COMPANY FINANCIAL REVIEW

The Company’s financial year extends from 1 February to 31 January. In this regard, FY2016 refers to financial

year ended 31 January 2016, FY2017 refers to financial year ended 31 January 2017, FY2018 refers to financial

year ended 31 January 2018 and FY2019 refers to financial year ending 31 January 2019. The Company prepared

a set of pro-forma financial statements for FY2017, as is explained in further detail in section 3.3 of this report.

The forecasts for FY2019 represent management’s assessment of the current performance within the context of

the local economy, the latest economic trends as well as domestic and international events taking place during

the current financial year.

The information included in the sections that follow has been sourced from the published financial statements of

the Company, supported by management information and Rizzo Farrugia’s own analysis. The figures quoted could

be subject to rounding differences when compared to published financial information.

3.1 ANALYSIS OF THE INCOME STATEMENT

Actual Actual Actual Forecast

as at 31 January 2016 2017 2018 2019

€'000 €'000 €'000 €'000

Revenue 86,033 88,119 94,980 100,673

Cost of Sales (53,039) (53,683) (57,920) (61,157)

Gross Profit 32,994 34,436 37,060 39,516

Selling & Distribution Costs (10,170) (10,712) (10,332) (11,554)

Administrative Expenses (11,078) (10,872) (12,066) (14,011)

Other Operating Expenses (271) - -

Operating Profit 11,475 12,852 14,662 13,951

Depreciation & Amortisation & One-off Adjustments 7,205 7,810 7,449 8,486

EBITDA 18,680 20,662 22,111 22,437

Investment Gains 14 5 - -

Finance Costs (1,377) (1,470) (1,207) (1,211)

Profit before Tax 10,112 11,387 13,455 12,740

Tax Income 869 471 949 500

Discontinued Operations 242 274 (642) -

Profit for the Year 11,223 12,132 13,762 13,240

Shares outstanding 30,000 30,000 30,000 30,000

EPS – Earnings Per Share (€) 0.374 0.404 0.459 0.441

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NB: In the FAS as presented in the prospectus dated 31 July 2017, the Income Statement of the Company combined

continuing and discontinued operations. The above statements are being presented in a manner consistent with

the published financial statements of the Company.

The above table presents the Group’s financial results for the periods ending 31 January 2016, 2017 and 2018

along with the forecasts as presented by the management for fiscal year 2019. The comparative EBITDA for

FY2016 and FY2017 has been revised in line with computations used for published financial information and now

takes account inventory write-downs. It should be noted that the figures for FY2016 and FY2017 both incorporate

the previous property segment, which has been successfully spun-off into a new public limited liability company

(Trident Estates plc) with its shares listed on the Official List of the Malta Stock Exchange on 30 January 2018. In

this respect, for most of FY2018 Trident Estates plc (and its subsidiaries) were still operating companies of the

Company. However, the impact of these operations on the income statement was immaterial, and as such does

not influence comparability.

FY2018 REVIEW

The Group’s total revenue reached €95 million in FY2018, up from €86 million in FY2016, equivalent to a CAGR of

5.1% over the period. The ‘brewing, production & sale of branded beers & beverages’ segment remained the

largest contributor to the Group’s revenue, comprising the activities of Simonds Farsons Cisk plc and EcoPure

Limited.

REVENUE GENERATION BY SEGMENT – FY2018

51.89%

32.81%

15.31%Brewing, production and sale ofbranded beers and beveragessegment

Importation, wholesale and retail offood and beverages, including wines &spirits segment

Operation of franchised food retailingestablishments segment

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The Group experienced growth across all its principal business segments over the last year:

As at 31 January 2016 2017 2018

€'000 €'000 €'000

Brewing, production and sale of branded beers and beverages segment 48,070 48,200 52,659

Less inter-segment sales (1,831) (2,054) (2,165)

Importation, wholesale and retail of food and beverages, including wines & spirits segment

32,053 31,738 33,293

Less inter-segment sales (4,656) (4,222) (4,333)

Operation of franchised food retailing establishments segment 12,397 14,457 15,526

Reported Revenue 86,033 88,119 94,980

• Brewing, production and sale of branded beers and beverages segment

This segment is represented by Simonds Farsons Cisk plc and EcoPure. Over the years under review, Farsons

maintained its strong market share with its own brands, principally Cisk™ and Kinnie™, with both brands

being main contributors to the financial results of this segment. Overall, sales in other beverages remained

healthy, with the Company registering an increase in the sales of beer and water, while experiencing a slight

decline in the sale of soft drinks. Production efficiencies achieved through the new bottling and packaging

facilities and the Group’s strategy to tap into the foreign markets contributed to improve the performance

of the Company. Meanwhile, EcoPure also reported an improved performance over the years, as the Group

maintained its marketing efforts to increase its client base and sales during the periods under review.

Additionally, the significant investment made during FY2018 to acquire a new automated water filling line

will further contribute to enhance production efficiencies and to ensure the highest quality standards.

• Importation, wholesale and retail of food and beverages, including wines & spirits segment

This segment is represented by FBIC and Quintano. Revenue from the imports of food and beverage segment

increased by 4.9% during the last financial year after a marginal decrease over the previous period,

notwithstanding increasing competition and a constantly evolving market. The improvement in results is

attributed to an increase in the brands portfolio represented by the companies, as well as an increase in the

level of unit sales. Consequently, operating margins from the stated segment improved from 6.6% in FY2017

to 8.1% in FY2018 as a result of improved efficiency levels through better stock management and effective

in-store marketing campaigns.

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• Operation of franchised food retailing establishments segment

This segment is represented by Food Chain. In this segment, the Group operates the franchises of KFC™, Pizza

Hut™ and Burger King™ in Malta. The company operates fourteen outlets which have reported consistent

growth throughout each year. In FY2018, the company reported sales growth across all brands as revenue

reached €15.5 million, an increase of 7.5% over FY2017. Likewise, efficiency levels also improved as operating

margins rose to 10.8% from 9.1% over the previous year.

EBITDA AND OTHER INCOME STATEMENT COMPONENTS

EBITDA, being the operating profit adjusted for depreciation, amortisation and before charging tax and interest

expense, improved from €18.7 million in FY2016 to €22.1 million in FY2018, reflecting a CAGR of 8.8% over the

two-year period. Furthermore, the Group registered improved EBITDA margins from 21.7% in FY2016 to 23.3% in

FY2018, as it capitalised on the efficiencies generated by the various capital projects that the Group had embarked

upon in recent years aimed at achieving cost and production efficiencies.

The Group incurred a finance cost of €1.2 million, a decrease of 17.9% over the previous fiscal year. This is a result

of the successful early redemption of the 6% €15 million bond, which has been refinanced with the new issue of

the €20 million 3.50% unsecured bonds redeemable in 2027. Because of the higher operating income and lower

finance costs, profit before tax and discontinued operations increased by 18.2% over the previous year to €13.5

million.

In FY2018, the Group recognised a one-off consolidation loss of €0.6 million from discontinued operations relating

to the spun-off Trident Estates plc (and its subsidiaries). Further to the investment tax credits that are applicable

for tax relief to the Group under the Business Promotion Act in respect of the investments made by the Company,

the group registered a tax income of €0.95 million. This resulted in a profit for the year of €13.8 million, or the

equivalent of €0.459 in earnings per share.

FORECAST FY2019

Total revenue is expected to increase to €100.7 million, mainly reflecting local market trends and continued drive

to increment the export segment. This implies an increase of 6.0% over FY2018. Moreover, cost of goods sold are

expected to increase in line with the increase in sales amounting to €61.2 million representing a gross profit

margin of 39.3%, a marginal improvement over the FY2018 figure of 39.0%. This improvement reflects the

investment made in capital expenditure embarked upon over the past years.

Selling & distribution costs and administrative expenses are expected to increase, as the Company endeavours to

fill existing head-count vacancies with new employees and retain existing ones in the face of increasing as

competition for the recruitment and retention of a skilled workforce. Meanwhile, in view of the increase in capital

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expenditure during FY2018, the depreciation charge is expected to increase substantially, resulting in a charge to

the income statement of €8.5 million (FY2018: €7.5 million). Nonetheless, EBITDA is expected to reach €22.4

million, an increase of €0.3 million over FY2018. In contrast, EBITDA margins are expected to marginally decline

to 22.3% from 23.3% recorded in FY2018 mainly reflecting the increase in operating costs.

Overall, the Group’s net profit for FY2019 is expected to be marginally lower, albeit, if the effect of the decrease

in non-cash depreciation charge is considered, the Group’s net profit for the year would stand 2.4% higher than

the previous period.

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3.2 ANALYSIS OF THE CASH FLOW STATEMENT

Actual Actual Actual Forecast

as at 31 January 2016 2017 2018 2019

€'000 €'000 €'000 €'000

Net cash generated from operating activities 16,453 13,135 20,893 20,483

Net cash used in investing activities (18,022) (19,714) (21,407) (11,140)

Net cash used in financing activities (1,713) 4,091 (656) (6,900)

Net movement in cash & cash equivalents (3,282) (2,488) (1,170) 2,443

Cash & cash equivalents at beginning of year 4,448 1,166 (1,322) (2,492)

Cash & cash equivalents at end year 1,166 (1,322) (2,492) (49)

FY2018 REVIEW

During FY2018, net cash generated from operations amounted to €20.9 million compared to €13.1 million in

FY2017, mainly reflecting the increase in profitability along with improvement in cash collection releasing locked

up working capital.

Net cash used in investing activities increased to €21.4 million from €19.7 million reported in the previous year.

This incorporates a one-time cash outflow of €6.2 million intended for the spin-off of the property segment, with

the remaining €15.2 million being used for capital expenditure purposes.

Meanwhile, net cash used for financing activities amounted to €0.7 million. This reflects the payment of interest

on the Company’s debt, the refinancing of the €15 million 6% bond as mentioned previously, repayment of

borrowings and the payment of €3.4 million in dividends.

Overall, the net movement in cash balance at the end of the year decreased by €1.3 million, which leads to a

negative cash balance for the year of €2.5 million, reflecting primarily the substantial capital investments made

by the Group during the year and the cash outflow in relation to the Trident spin-off.

FORECAST FY2019

The Company’s net cash position for the year is expected to improve as management is anticipating a positive net

movement in cash & cash equivalents of €2.4 million. Cash used for investing activities is expected to amount to

€11.1 million in FY2019 (FY2018: €21.4million) reflecting a lower capital investment programme planned for the

year. This figure mainly includes the routine annual capital expenditure incurred by the company and the ongoing

investments mentioned in the previous section 1.6 - Material Operational Developments.

Net cash generated from operating activities is expected to remain relatively stable at €20.5 million (FY2018: 20.9

million) while net cash used in financing activities is expected to amount to €6.9 million (FY2018: €0.7 million)

which reflects interest, dividend and bank loan repayments.

20

3.3 ANALYSIS OF THE STATEMENT OF FINANCIAL POSITION

Actual Actual Pro-Forma Actual Forecast

as at 31 January 2016 2017 2017 2018 2019 €'000 €'000 €'000 €'000 €'000

Assets

Non-Current Assets

Property, Plant & Equipment 89,983 110,889 110,889 117,475 120,064

Intangible Assets 658 616 616 574 532

Deferred Tax Assets 4,210 3,486 3,486 5,341 6,100

Investment in Jointly-controlled Entity - - 12 - -

Trade & Other Receivables 2,757 3,002 3,002 3,710 3,896

Total Non-Current Assets 97,608 117,993 118,005 127,100 130,592

Current Assets

Inventories 12,334 14,569 14,569 13,652 14,335

Trade & Other Receivables 18,495 18,316 18,308 19,051 18,150

Current Tax Assets 133 29 29 5 5

Cash & Cash Equivalents 2,445 768 768 3,720 1,417

Total Current Assets 33,407 33,682 33,674 36,428 33,907

Non-Current Assets classified as held for sale 31,558 31,266 - - -

Total Assets 162,573 182,941 151,679 163,528 164,498

Equity and Liabilities

Capital & Reserves

Share Capital 9,000 9,000 9,000 9,000 9,000

Reserves 100,459 114,271 78,190 87,632 97,468

Total Equity 109,459 123,271 87,190 96,632 106,468

Non-Current Liabilities

Trade & Other Payables 1,184 905 905 764 -

Derivative Financial Instruments 1,083 750 750 436 350

Borrowings 23,807 31,581 31,581 33,188 29,888

Provision for other liabilities and charges 64 54

Total Non-Current Liabilities 26,074 33,236 33,236 34,452 30,292

Current Liabilities

Provision for Other Liabilities & Charges 54 36 36 56 56

Trade & Other Payables 20,056 18,974 18,974 21,507 21,597

Current Tax Liabilities 690 570 570 910 990

Derivative Financial Instruments 330 335 335 325 325

Borrowings 3,026 4,382 11,338 9,646 4,766

Total Current Liabilities 24,156 24,297 31,254 32,444 27,734

Liabilities attributable to non-current assets held for sale 2,884 2,137 - - -

Total Liabilities 53,114 59,670 64,489 66,896 58,026

Total Equity & Liabilities 162,573 182,941 151,679 163,528 164,498

Shares Outstanding 30,000 30,000 30,000 30,000 30,000

Net Asset Value per Share (€) 3.649 4.109 2.906 3.221 3.549

21

NOTE ON THE PRO-FORMA STATEMENT OF FINANCIAL POSITION

In 2014, the board of directors of the Company first announced its intention to spin-off the segment related to

Property Management segment of the Group. During the annual general meeting held on 27 June 2017, the

Company’s shareholders approved the spin-off of an identified property portfolio to be held by Trident Estates

plc. To better explain the effect of the spin-off, management prepared and published in a circular to shareholders

a set of pro forma statements which aimed to illustrate the effect of the spin-off on the Group. Such pro-forma

statements were subsequently published in the prospectus issued by the Company dated 31 July 2017. The basis

of these statements was the closing financial position of FY2017, thereafter reflecting the multiple effects of the

spin-off had such transaction been deemed to have taken place on 1 February 2017. Since the impact of the spin-

off was material to the Statement of Financial Position, the pro-forma figures are included for comparability

purposes.

FY2018 REVIEW

The Group’s total asset base has inherently been made up to the extent of more than 70% from ‘property, plant

& equipment’ (PPE). A significant proportion of the increase in PPE over the years is the result of the investment

that the Group undertook in the new beer packaging hall at a total cost of close to €26 million.

As a result of the successful spin-off of Trident Estates plc, the portion of non-current assets classified as held for

sale as reported in FY2017 is no longer part of the assets included in the balance sheet of the Group Consequently,

total assets decreased from €182.9 million in FY2017 to €163.5 million in FY2018. Nevertheless, comparing the

pro-forma figures (which present the opening financial position of the Group of FY2017 without the property

segment) as presented in the Financial Analysis Summary of 2017, the Company’s total assets increased by 7.8%

from €151.6 million to €163.5 million. The same concept applies with respect to the changes in the total equity

position. Shareholders’ equity fell by 21.6% in FY2018 over the actual figures of FY2017. However, shareholder’s

equity increased by 10.2% when compared to the pro-forma figures. The decrease in shareholders’ equity in FY

2018 represents the dividend in kind of €37.2 million distributed to all shareholders upon the ‘spin-off’.

Actual Actual Actual

as at 31 January 2016 2017 2018 €'000 €'000 €'000

Inventories 12,334 14,569 13,652

Trade & Other Receivables 18,495 18,316 19,051

Trade & Other Payables (20,056) (18,974) (21,507)

Working Capital 10,773 13,911 11,196

22

During the three-years ended 31 January 2018, the Group experienced a decrease in inventories in line with the

Company’s strategy to enhance the operations and logistics facilities. In fact, the inventory turnover ratio (the

amount inventory is sold and replaced throughout the year) for FY2018 improved to 4.24 times (FY2017: 3.97

times). Additionally, trade & other receivables and trade & other payables increased, mainly reflecting the

increased level of business of the Group. The net effect is a reduction in working capital from €13.9 million in

FY2017 to €11.2 million in FY2018.

The base for the Group’s operations is supported through a mix of borrowings and equity:

Actual Actual Actual

as at 31 January 2016 2017 2018 €'000 €'000 €'000

Borrowings

Bank overdrafts & short-term borrowings 3,026 4,382 9,646

Bank Borrowings (long-term) 8,976 15,876 12,898

Finance Lease Liability - 720 585

6.0% Bonds 2017- 2020 14,831 14,985 -

3.5% Bonds 2017 -2027 - - 19,705

Total Borrowings 26,833 35,963 42,834

Cash & equivalents (2,445) (768) (3,720)

Net Debt 24,388 35,195 39,114

Equity

Share Capital 9,000 9,000 9,000

Revaluation & Other Reserves 54,105 59,146 49,409

Hedging Reserves (919) (705) (495)

Retained Earnings 47,273 55,830 38,718

Total Equity 109,459 123,271 96,632

Total Funding 133,847 158,466 135,746

Gearing 18.2% 22.2% 28.8%

(Net Debt / Total Net Funding)

Net debt experienced an increase from €35.2 million in FY2017 to €39.1 million in FY2018. This is principally due

to additional borrowings undertaken by the Company to finance the increased capital expenditure together with

the injection of additional capital in Trident Estates plc, prior to the spin-off. This in addition with the spin-off of

the property segment which decreased the equity position of the Group, caused the reported gearing ratio to

increase from 22.2% in FY2017 to 28.8% in FY2018.

23

FORECAST FY2019

Total assets are expected to remain at much the same levels as those presented in FY2018. Notwithstanding the

capital expenditure for the year of €11.1 million, PPE is projected to increase marginally as much of the increase

will be offset by the depreciation charge of €8.5 million.

On the liability side, total borrowings are expected to decrease from €42.8 million to €34.7 million mainly resulting

from the additional operational cash flow projected and the lower capital investment. Consequently, total

liabilities are to decrease to €58.0 million from €66.9 million. Total equity is expected to increase to €106.5 million

in FY2019 from the current value of €96.6 million in FY2018, representing a substantial increase of 10.2%.

24

PART 4 – RATIO ANALYSIS

The following set of ratios have been computed by Rizzo Farrugia & Co. (Stockbrokers) Ltd using the figures

extracted from annual reports and management information.

PROFITABILITY RATIOS

The below is a set of ratios prepared to assist in measuring a company’s ability to generate profitable sales from

its assets.

Actual Actual Actual Forecast FY2016 FY2017 FY2018 FY2019

Gross Profit margin 38.35% 39.08% 39.02% 39.25%

(Gross Profit / Revenue)

EBITDA margin 21.71% 23.45% 23.28% 22.29%

(EBITDA / Revenue)

Operating Profit margin 13.34% 14.58% 15.44% 13.86%

(Operating Profit / Revenue)

Net Profit margin 13.04% 13.77% 14.49% 13.15%

(Profit for the period / Revenue)

Return on Equity 10.70% 10.43% 14.97% 13.20%

(Profit for the period / Average Equity)

Return on Capital Employed 8.61% 8.21% 10.21% 9.30%

(Profit for the period / Average Capital Employed)

Return on Assets 7.19% 7.02% 8.73% 8.10%

(Profit for the period / Average Assets)

The Group has over the years been able to generate healthy double-digit return margins, with consistent

improvements each year. Going forward, the Company is expecting a marginal decline in profitability ratios mainly

because of the current shortage of labour supply which is expected to lead to wage inflation and this, in turn, will

translate into increases in operating costs.

Notwithstanding that the Company’s performance improved over the year, the large increase in return on equity,

return on capital employed and return on assets is a result of the spin-off of the previously low yielding property

segment which decreased the denominator figure, resulting in a higher value in each respective ratio.

25

LIQUIDITY RATIOS

The below is a set of ratios prepared to assist in measuring a Company’s ability to meet its short-term obligations.

Actual Actual Pro-Forma Actual Forecast FY2016 FY2017 FY2017 FY2018 FY2019

Current Ratio 1.38x 1.39x 1.08x 1.12x 1.22x

(Current Assets / Current Liabilities)

Cash Ratio 0.10x 0.03x 0.02x 0.11x 0.05x

(Cash & cash equivalents / Current Liabilities)

The Group’s current ratio historically has always stood over 1x. The cash ratio has been low over the years, as the

Group utilised banking facilities in addition to cash flow generated from operations to finance its capital

investments.

SOLVENCY RATIOS

The below is a set of ratios prepared to assist in measuring a Company’s ability to meet its debt obligations.

Actual Actual Pro-Forma Actual Forecast FY2016 FY2017 FY2017 FY2018 FY2019

Interest Coverage ratio 13.71x 14.10x 13.53x 18.32x 18.53x

(EBITDA / Net finance costs)

Gearing Ratio (1) 0.22x 0.29x 0.48x 0.40x 0.31x

(Net debt / Total Equity)

Gearing Ratio (2) 19.69% 22.59% 32.99% 30.71% 24.56%

[Total debt / (Total Debt plus Total Equity)]

Net Debt to EBIDTA 1.30x 1.71x 2.11x 1.77x 1.48x

(Net Debt / EBIDTA)

The Group’s balance sheet was subject to change because of the spin-off of the property segment. This can be

observed by taking the difference between FY2017 and the pro-forma figures of FY2017. Having said that, this

modification should not be viewed negatively as it simply represents changes in accounting classifications.

In fact, the Group’s financial position improved over the previous year across all metrics and is expected to

improve further next year. In FY2018, the interest coverage ratio increased to 18.32 times from 14.10 times in

FY2017 (pro-forma FY2017: 13.53 times), as the Group generated a higher EBITDA while simultaneously reducing

the cost of finance. Additionally, gearing decreased as a result of the increase in the total equity base. Moreover,

26

the Group’s net debt to EBITDA metric is just 1.77, meaning that with the current levels of EBITDA, it would take

the Group less than two years’ worth of EBITDA to repay debt in full.

27

PART 5 – VARIATIONS IN THE ISSUER’S FINANCIAL PERFORMANCE

Income Statement Actual Forecast

as at 31 January 2018 2018 Variance

€'000 €'000 €'000

Revenue 94,980 91,097 3,883

Cost of Sales (57,920) (56,936) (984)

Gross Profit 37,060 34,161 2,899

Selling & Distribution Costs (10,332) (10,726) 394

Administrative Expenses (12,066) (11,688) (378)

Other Operating Expenses - 10 (10)

Operating Profit 14,662 11,757 2,905

Depreciation & Amortisation & One-off Adjustments 7,449 7,427 22

EBITDA 22,111 19,184 2,927

Finance Costs (1,207) (1,260) 53

Profit before Tax 13,455 10,497 2,958

Tax Income 949 (399) 1,348

Discontinued Operations (642) - (642)

Profit for the Year 13,762 10,098 3,664

Total revenue for FY2018 was €3.9 million higher than that forecast last year, mainly resulting from the upturn in

the tourism industry, the recorded high temperatures during the year and the unplanned local mass events held

during the year. Consequently, cost of goods sold was higher than expected in line with the additional sales.

Selling & distribution costs reported were lower by €0.4 million as a result of the significant level of investment

made in enhancing the logistics centre complemented by the new shuttle pallet transfer system, a number of

un/loading bays as well as a new truck park. In contrast, administrative costs reported were higher than expected

by €0.4 million reflecting the increase in personnel costs. In view of the extensive investments carried out by the

Group, the Company has benefitted from tax credits in the form of investment tax credits and conversion tax

credits.

28

PART 6 –LISTED SECURITIES OF THE GROUP

SHARES

SFC’s shares have been listed on the Official List of the Malta Stock Exchange since 20 December 1995.

Issued Share Capital: 30,000,000 ordinary shares with a nominal value of €0.30 per share

ISIN: MT0000070103

DEBT SECURITIES

SFC’s listed debt securities comprise:

Bond: €20,000,000 3.5% unsecured bonds redeemable in 2027

ISIN: MT0000071234

29

PART 7 - COMPARABLES

The table below compares the Issuer to other listed debt on the local market having broadly similar maturities.

The list excludes issues by financial institutions. The comparative set includes local groups whose assets, strategy

and level of operations may vary significantly from those of the Issuer and are therefore not directly comparable.

Nevertheless, the table below provides a sample of some comparatives:

Bond Details Outstanding

Amount Total Assets Total Equity

Gearing Ratio*

Net Debt to EBITDA**

Interest Cover***

YTM^

(€) (€'000) (€'000) (%) (times) (times) (%)

5.00% Dizz Finance plc 2026 8,000,000 19,262 4,754 66.1 5.16 3.16 4.41

4.80% Med. Maritime Hub Finance plc 2026 15,000,000 29,276 4,784 73.9 8.63 2.13 4.07

4.50% Medserv plc 2026 (EUR) 21,982,400 153,273 28,251 63.5 11.36 1.10 4.37

4.25% Corinthia Finance plc 2026 40,000,000 1,765,072 901,595 42.1 9.55 2.23 3.58

4.00% MIDI plc 2026 50,000,000 235,302 86,621 43.3 25.30 -0.98 3.45

4.00% IHI plc 2026 (Secured) 55,000,000 1,602,317 884,632 36.4 7.91 2.64 3.42

4.00% IHI plc 2026 (Unsecured) 40,000,000 1,602,317 884,632 36.4 7.91 2.64 3.44

3.90% Plaza Centres plc 2026 8,500,000 44,882 27,625 30.2 4.46 6.10 3.82

3.75% Premier Capital plc 2026 65,000,000 161,128 47,607 67.3 1.82 10.15 3.40

4.50% GHM plc 2027 15,000,000 21,050 2,876 70.7 4.57 1.81 3.90

4.35% SD Finance plc 2027 65,000,000 217,599 65,698 47.7 3.21 5.46 3.75

4.00% Eden Finance plc 2027 40,000,000 169,936 90,161 36.5 4.97 4.46 3.44

3.75% Tumas Investments plc 2027 25,000,000 198,819 89,238 25.8 2.10 10.13 3.22

3.50% Simonds Farsons Cisk plc 2027 20,000,000 163,528 96,632 28.8 1.77 18.32 2.87

Source: Yield to Maturity from rizzofarrugia.com, based on bond prices of 28 June 2018. Ratio workings and financial information quoted

have been based on the financial statements of issuers (or their guarantors where applicable) as published for financial year ended 31

December 2017 (or later, as applicable).

*Gearing Ratio: This refers to the fundamental analysis ratio of a company's level of long-term debt compared to its equity capital. In the above table this is computed as follows: Net Debt / (Net Debt + Equity).

**Net Debt to EBITDA: This is the measurement of leverage calculated by dividing a company's interest-bearing borrowings net of any cash or cash equivalents by its EBITDA. ***Interest Cover: The interest coverage ratio is calculated by dividing a company’s EBITDA of one period by the company’s net finance costs of the same period. ^Yield to Maturity (YTM) from rizzofarrugia.com, based on bond prices of 28 June 2018. YTM is the rate of return expected on a bond which is held till maturity. It is essentially the internal rate of return on a bond and it equates the present value of bond future cash flows to its current market price.

30

The chart below compares the Simonds Farsons Cisk plc bond to other corporate bonds listed on the Malta Stock

Exchange and benchmarked against the Malta Government Stock yield curve as at 28 June 2018.

At a coupon of 3.50% per annum, the Simonds Farsons Cisk 2027 yields 2.87% per annum to maturity, which is

approximately 178 basis points over the average yield to maturity of Malta Government Stock (MGS) maturing

in 2027 and approximately 60 basis points below the average yield to maturity of corporate bonds maturing in

2027 (data correct as at 28 June 2018).

2.87%

0.00%

0.50%

1.00%

1.50%

2.00%

2.50%

3.00%

3.50%

4.00%

4.50%

5.00%

2019 2020 2021 2022 2023 2024 2025 2026 2027

Simonds Farsons Cisk plc vs Corporate & MGS YTM - as at 28.06.2018

Corporate Average YTM MGS Average YTM 3.50% SFC plc 2027

31

DEFINITIONS

STATEMENT OF COMREHENSIVE INCOME EXPLANATORY DEFINITIONS

Revenue Total revenue generated by the company from its business activity

during the financial year.

Cost of Sales The costs incurred in direct relation to the operations of the Issuer

Gross Profit The difference between Revenue and Cost of Sales.

EBITDA Earnings before interest, tax, depreciation and amortization,

reflecting the company’s earnings purely from operations.

Depreciation and Amortization An accounting charge to compensate for the reduction in the value

of assets and the eventual cost to replace the asset when fully

depreciated.

Finance Income Interest earned on cash bank balances and from the intra-group

companies on loans advanced.

Finance Costs Interest accrued on debt obligations.

Net Profit The profit generated in one financial year.

CAGR The compounded annual growth rate is the mean annual growth

rate of the specified figure over a specified period longer than one

year.

CASH FLOW STATEMENT EXPLANATORY DEFINITIONS

Cash Flow from Operating Activities The cash used or generated from the company’s business activities.

Cash Flow from Investing Activities The cash used or generated from the company’s investments in new

entities and acquisitions, or from the disposal of fixed assets.

Cash Flow from Financing Activities The cash used or generated from financing activities including new

borrowings, interest payments, repayment of borrowings and

dividend payments.

32

STATEMENT OF FINANCIAL POSITION EXPLANATORY DEFINITIONS

Assets What the company owns which can be further classified in Current

and Non-Current Assets.

Non-Current Assets Assets, full value of which will not be realised within the forthcoming

accounting year

Current Assets Assets which are realisable within one year from the statement of

financial position date.

Liabilities What the company owes, which can be further classified in Current

and Non-Current Liabilities.

Current Liabilities Obligations which are due within one financial year.

Non-Current Liabilities Obligations which are due after more than one financial year.

Equity Equity is calculated as assets less liabilities, representing the capital

owned by the shareholders, retained earnings, and any reserves.

OTHER DEFINITIONS

Yield to Maturity YTM is the rate of return expected on a bond which is held till

maturity. It is essentially the internal rate of return on a bond and it

equates the present value of bond future cash flows to its current

market price.